Wednesday, May 14, 2014

5/14/14 Elliott Wave Update

We begin today's update by pointing out the wave count possibilities that exist on large to narrow scales.  Since the 2009 low, as has been discussed, there can be a zigzag or impulse higher developing.  The strongest option for the zigzag option is counted above in color.  It can also still be underway where the last impulse leg of the zigzag starts at [C] in 2011.  Turning [D] and [E] into a 1st and 2nd wave must be forced however and is not a great option.  Wave counts since the b low for impulses not essentially complete have low probabilities, regardless of how they are counted.
If an impulse beginning at the 2009 low is still underway, an impulse higher since [C] in 2011 will be the correct choice.  While an impulse higher from this point can be essentially complete, it is a weak wave count (it uses the impulse option from [E] to A in 2013).  Stronger is an impulse still mature, but using an ending diagonal higher underway since (2) in 2013 or a sideways correction beginning at (1) in 2013.
An impulse higher since [4] is a possibility, but either the core of this wave still lies ahead or there is an out-of proportion sequence of waves higher unfolding.  Because both of these are low probability events, this count is very unlikely.
Inspecting the last 2 years for a moment, we find that there can be a sideways correction since the (1) high developing or an ending diagonal beginning at [4], B in 2013, or (2).  These are all reasonable options worth considering.

How do the last 5-6 years fit into the larger picture?  First, there is a good probability that [III] marked a 3rd wave that is complete, rather than an impulse that is still underway since the [II] low.  If [III] is then a major top, something sideways likely did unfold or is unfolding.  There is decent proportionality between [II] and [III] to (a/w), so an impulse wave [V] can be underway.  There are concerns about the very high market cap to GDP ratio and pop-culture sentiment at this time however; these indicators do not seem to form particularity fertile grounds for a rally continuing for years to decades without a significant pullback first.  Maybe there is an impulse higher since (a/w) forming that is winding down as the first wave of a larger impulse.  There can also be another test of the 2002/2009 support level.  These impulsive and corrective options are both very good and suggest that the 2002/2009 support level will hold.

There is a very clear-looking 3 waves higher since the wave (4) low that jumps off of the chart above.  Obviously there can be a sideways correction underway since (3), however keep in mind that this is only applicable if something sideways is unfolding since the early-2014 wave (1) high.  This would be a very complex pattern but the proportionality of its waves is reasonable.
On a similar note, a double zigzag can be underway since (4) where the first zigzag completed at (5).  This would fit into a sideways pattern since (1) or an ending diagonal leg higher from (4), but this is adding a layer of unnecessary complexity to the picture.  The markets' moves tend towards simplicity.  Important to note here is that an ending diagonal higher since (2) in 2014 is possible and worth considering, but then a greater height above the (3) high is preferred.  This double zigzag option would resolve this height issue, but again of course at the sacrifice of simplicity.
Something sideways and still underway beginning at A in April is also possible, but it would require some strange looking waves that do not count naturally.  The structure seems to require a flat lower since [b] marked above with the horizontal line.
An impulse higher since B where its core is still ahead is possible, but is not likely or worth noting due to the wave structure higher since [c] ([d] and [e] essentially must be a 3-wave moves).
A far better approach to the above picture is to take the three waves higher since (4) and count them as they first appear, a zigzag with triangle B wave which is in color above.

Finally, before the final analysis, the short-term waves since C show 5 waves lower.  This move in and of itself can be an impulse, but is more likely a set of 1-2 waves developing into a larger impulsive move lower due to the balance of the pattern so far.

The final review of the market can be found at

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